Government Would Save Money by Relieving Mortgage Tax
Scrapping a tax increase on new buildings might facilitate the housing crisis experienced by renters, as indicated by Capital Economics. Since 2021, mortgage interest tax relief for landlords has been confined to the introductory income tax rate.
Based on the analysis, in the scenario where the Bank of England's base interest rate arrives at its highest point of 5 percent and stays above 2.5% up to the end of 2027, it is estimated that around 13 percent of privately rented properties in the UK may be at risk of being lost compared to 2021.
By recuperating mortgage interest relief, Capital Economics evaluates that the private housing market would retain 110,000 more properties, leading to an increase in income equal to £400 million and corporation tax revenue for the Treasury.
Urgent Need for Policy Reform
Ben Beadle, CEO of the National Residential Landlords Association, expressed his concern on this topic. He stated that in 2015, the government aimed to establish a more equitable platform for individuals purchasing a new property in London and other cities for rental purposes or residing in. As a result, landlords experienced amplified costs, while the burden it placed on renters was completely disregarded. Tax increases on landlords have exaggerated the supply crisis.
According to the research, the conditions might not improve if the reform does not reserve. A radical departure from these harmful policies is crucial to curtail the loss of rental properties, mitigate rent increases, and enhance Treasury revenue.
Investigating the Consequences of Mortgage Interest Reforms
Furthermore, Capital Economics discovered that abandoning the mortgage interest reforms could diminish future rental inflation and alleviate financial pressures on landlords.
The National Residential Landlords Association urges the government to conduct a comprehensive review to assess the influence of the latest tax increases on the segment. This analysis should investigate the impact of alterations in mortgage interest relief on the availability of private homes and the price of accessing buildings for rent.